Detailed Narrative
Strong Q3 FY26 Performance Driven by CDMO and International Formulations
Akums Drugs & Pharmaceuticals reported a robust Q3 FY26, with operating revenue growing 14.8% YoY to INR 1,160 crores and operating EBITDA increasing 21% YoY to INR 147 crores. EBITDA margins expanded by 65 basis points YoY to 12.7%. This performance was primarily fueled by the CDMO segment, which saw over 16% top-line growth driven by strong volumes, and the international branded formulation business, which improved significantly with 18% YoY and 120% QoQ revenue growth.
Margin Expansion and Operational Efficiency
The company achieved improved profitability across segments, with overall EBITDA margins expanding 338 basis points QoQ. The CDMO segment's gross margin was over 37%, an improvement from 36.6% in the previous Q3. The international branded formulation business also saw significant gross margin expansion, reaching 35% from 25% in the prior quarter, indicating effective cost management and operating leverage.
Strategic Global Expansion Initiatives
Akums is actively pursuing global expansion, with key projects in Europe and Zambia. The EU CDMO contract, valued at an annual run rate of EUR 35 million until December 2032, is progressing, with commercial supplies from Plant 2 expected to commence in H1 FY28. The Zambia project is set to generate $25 million in revenue from India in both calendar years 2026 and 2027, with a local facility expected to begin commercial supplies in calendar year 2028.
API Business Turnaround Efforts
The API segment, despite a 35.4% YoY revenue increase to INR 54 crores, continued to face pricing pressure, resulting in a negative EBITDA of INR 7 crores. However, this represents an improvement from negative INR 11 crores in Q3 FY25 and negative INR 14 crores in Q2 FY26. Management is focused on portfolio rationalization, cost optimization, and shifting towards profitable non-cephalosporin products, aiming for breakeven.
Injectables Facility Ramp-up and Future Growth
The newly commercialized injectables facility is currently operating at 'in teens' utilization, contributing minimally to the overall CDMO P&L. Management anticipates a significant ramp-up in utilization and revenue contribution during Q2 and Q3 of the next financial year, which is expected to bolster the overall injectable CDMO business. The AHL overall business, which includes two plants, reported a loss of INR 17.9 crores for the first nine months.
Prudent Capital Allocation and Liquidity
The company reported a healthy cash surplus of INR 1,573 crores, with cash flow from operations at INR 1,109.5 crores and free cash flow at INR 944.5 crores. Capital expenditure for the quarter was INR 57 crores, bringing the nine-month total to INR 165 crores, primarily directed towards maintenance, modernization, and capacity expansion to support future growth in dosage forms. Management is evaluating M&A opportunities but remains cautious about strategic fit and valuation.
Capacity Utilization and Operational Strategy
Akums' overall capacity utilization stood at 47%, with a stated peak achievable utilization of 55-60%. This limit is attributed to the extensive changeovers, cleaning, and preventive maintenance required for manufacturing over 20,000 SKUs for 1,500 customers. The company maintains buffer capacity to meet excessive growth demands and continues to invest in capex for dosage forms where capacities are currently stretched.